Why the Latest Step in the Disney-Fox Merger Spells Bad News for Consumers

Updated on September 20, 2018
PerBylund profile image

Assistant Professor of Entrepreneurship and Records-Johnston Professor of Free Enterprise in the School of Entrepreneurship at OSU.

21st Century Fox's shareholders gave the green light on July 27 to sell the company's entertainment assets to Walt Disney Co., a move that will see Disney shell out more than $71 billion to acquire most of Fox's assets.

The deal is expected to close in the first half of 2019, when Disney will scoop up Fox's film and television assets, including its shares in streaming service Hulu and European broadcast company Sky. While some might view this move as the logical next step in an increasingly conglomerated entertainment industry, the merger represents lost potential for consumers.

This deal makes sense for Disney — which plans to debut its own streaming services by next year — but it calls into question the nature of the media marketplace. Disney is acquiring a massive arsenal of intellectual property and a distribution network to match. The company's portfolio already includes several movie studios and television channels, and it will gain the majority stake in Hulu. Disney will also gain additional leverage over movie theaters, which are already squeezed by the company's distribution policies.

Disney’s acquisition is not really one of expansion, however; it is one of protection. Having a monopoly on a restricted supply of entertainment will allow Disney to charge a premium price for its content and products. Consumers unwilling to pay those higher prices will go without, and fewer goods will consequently be sold. In this case, Disney's monopoly privilege might boost short-term profits at the expense of consumers and long-term interest in its products.

Why would Disney want that outcome? In the entertainment industry’s regulatory framework, mergers are the only path to growth and innovation. Given the costs of regulatory compliance for companies of Disney’s size and influence, it’s impossible for it to pivot — into streaming, for example — without buying the properties of another organization.

But the consequences of this regulatory environment don’t stop there. A company like Disney has every reason to stay as close and as friendly with regulators as possible, whether by providing special perks, making campaign donations, or instituting "revolving door" employment strategies.

While an open market would see continuous attacks from innovators and disruptors, Disney avoids that competition because it dominates the highly regulated field. And when a company like Disney becomes big enough — when its market influence begins to overwhelm new competition — politicians begin turning to it for advice on which regulations to draft.

Disney's successful navigation of the antitrust review process hinged on its ability to convince regulators that it needed this new power to compete in the world of online video, where it has yet to have an impact. Disney’s most famous legislative victories have come through the extension of its copyrights (the 1998 Copyright Term Extension Act was nicknamed the Mickey Mouse Protection Act), and it expanded on its impressive track record of almost complete success in the lobbying arena with the DOJ's recent approval.

Obviously, corporate maneuvering through bureaucratic red tape doesn’t benefit the average consumer. If consumers felt the full consequences of their powerlessness in such an industry all at once, they might speak out; unfortunately, the negative effects of these mergers take a long time to reach consumers. People will see slight upticks in prices across various categories because of dampened competition and higher regulatory overhead costs. Over time, those increases will yield a whole market in which things cost more than they should.

The biggest loss, however, is the value that will simply not see the light of day because entrepreneurs and innovators don't get the chance to compete. Consumers will not have anything taken from them — they simply won’t see the progress that could be created in a better environment for innovation.

Of course, merging won't necessarily crown Disney the king of content in perpetuity. Not even a monopoly can save a company from itself, as evidenced by the merger of AOL and Time Warner in 2000. Disney and Fox have unique histories, cultures, and company values, any of which could cause tension and limit the effectiveness of the merger.

Still, Disney’s move to consolidate power should surprise no one. In an overregulated market in which innovating comes at an artificial cost and is more difficult than buying the competition, monopolies become inevitable. It remains to be seen in what specific ways consumers will lose under the vise grip of Disney, but with no disruptors able to enter the field, consumers will never know what they never had.


    0 of 8192 characters used
    Post Comment

    No comments yet.


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, reelrundown.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://maven.io/company/pages/privacy

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
    ClickscoThis is a data management platform studying reader behavior (Privacy Policy)